I believe it's in Brandon Turner's "7 Years to 7 Figure Wealth" that he recommends making improvements that increase the value of each property you buy by 10%. Can anyone suggest some examples of improvements that accomplish that?
Being from California, take Brandon’s advice with a grain of salt. 10% in Pasadena is a lot different than 10% in podunk Washington. Sometimes I have to turn off the podcast when he’s giving advice. It’s so frustrating to hear him say things like don’t worry about your first deal just go take action. He started by doing houses under 50k the properties we are dealing with in California are literally 10x the asking price. I take bits and pieces from him. Sorry if this didn’t answer your question lol
I got the term “podunk” from our beloved founder of BiggerPockets @Joshua Dorkin
He rags on Brandon for it in some episodes they did together.
Also I agree with you. No one is forcing me to invest local and if I hate it here so much why don’t I go and invest in those same “ podunk” houses right!?
And finally I want to play nice here but I gotta say I did have a good laugh seeing where you were from 😂
Agree on improving kitchens, baths, flooring and updating the "style" of the property.
As for the guts, new plumbing, hvac, & windows are another way to inject some value.
I work in the Pasadena area and we increase value of homes by essentially gutting them out and recreating/reimagining the flow of the house along with updating the dreary look which hasn't been improved upon for 20-30 years.
All depends on your budget of course.
@Philip C. I love Pasadena and grew up around there. But, I would never invest there, unless I had a large amount of working capital and the desire to flip houses. However, Pasadena is full of older houses that need some modern amenities and features, like higher ceilings, smooth ceilings, new flooring, double pane windows, modern appliances, modern paint colors, etc. The easiest way to find examples of improvements to accomplish the 10% increase would be to look at homes in the neighborhood and what features, improvements, and amenities they have and then find a property that doesn't have those.
@Philip C. Also to an earlier point about taking some of Brandon advice with a grin of salt know he started buying at the deepest part of the last recession, which was probably the greatest buying opportunity in 75 years.
So his advice may not be super applicable if you live in a expensive market that’s now very much a sellers market.
Having listened to 200 plus of their podcasts his advice doesn’t seem to change that much
@Philip C. Improving value is great, but to get the full picture you want to look at return on investment (ROI). And the type of ROI you aim for should be based on strategy. I don't know if the quote you mentioned refers to rentals, flips, or what, but if it's a rental, focus primarily on cash-on-cash return. For example: by spending $10k, rents can be increased by $100 ($1,200/yr.) and $1,200/$10,000 = 12%. Yes, value will increase but it doesn't matter if you aren't tapping into it (via refinancing or selling). If you're flipping on the other hand, look at ROI using the ratio of cost and the corresponding increase in projected sale proceeds. In short, focus on increases in income/value relative to costs, not just gross value added.
Specific tips will depend on the nuances of your market, property type and property and I would recommend talking specifics with local pro's (brokers/investors) to get their opinions based on the property type/market you're focused on.
@Bryan Zuetel I am looking for investment opportunities outside LA County, but still in California (in the hopes my dollar goes further), so I think your advice gives me some great examples of what to look for. Thank you!
@Caleb Heimsoth Thank you for the insight. I was wondering about the timing of his article. It's good to know that his numbers may not necessarily apply.
@Tom Blake Great stuff! Thank you. I am focusing on Buy and Hold rentals and cash flow. If I am to understand your recommendations correctly, are you saying that making 10% improvements only matters if I intend to flip the property? I thought the idea was to make the improvements and then raise the rents. My intention is to increase cash flow. Can you clarify, please?
Flooring, Paint, and Landscaping are always your best bang for your buck. I'd also throw in a new front door and white wood trim.
People seem to love neutral gray walls with fresh white wood trim. It's a clean look and cheaper than you'd think.
@John Allen Thanks for the tips. Never having done this before, it's nice to know that simple things like flooring, paint and landscaping is all that's needed to improve value by 10%. I think even a noob like myself can handle that.
California is way out of my price range, so I will have to look out of state, which of course, brings a whole slew of other challenges.
I appreciate everyone's input.